NIB looks to future of health care

NIB
chief executive
Mark Fitzgibbon
is yet to pull off a big merger but is pushing agendas that are far more consequential for health insurance.

When he thinks about the outlook, he sees a situation he claims is unsustainable: a massive jump in government health spending. Forecasts from the latest inter-generational report show federal government spending on health is expected to jump from $50 billion, or 4 per cent of GDP, to $250 billion, or 7.1 per cent of GDP, by 2050.

“At some point we have to accept that we cannot provide a free healthcare system as government won’t have the taxes to do it," he says.

He points to countries such as Singapore, which have made private health insurance compulsory, with subsidies for those who cannot afford it.

If a greater burden of healthcare costs then fell on consumers, Fitzgibbon highlights the need for options to help.

These include savings accounts with tax breaks, where health insurers could refer clients to a bank that provided accounts with tax-free interest on savings to help meet their healthcare costs.

The use of reverse mortgages, or drawing down on home equity to meet healthcare expenses, may also be an option.

The NIB chief says he has “kicked the tyres" on the issue of savings accounts with banks, though not in any detail.

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“There are a lot of opportunities to think laterally about financing healthcare," he says.

“In the long run, health insurance will be seen to sit with the broader suite of financial services offered by banks and institutions."

More broadly, he is scathing of a system which does not encourage risk prevention. While he supports the community rating pool which sees all insurers collectively foot the bill for those aged over 55, he says behaviour such as smoking or eating habits that cause obesity should be penalised with higher premiums.

“The moral hazard will grow if people don’t face a consequence for their behaviour or just take subsidies to reduce the true cost," he says.

He is also a supporter of a system used in some countries where the contribution of individual insurers to a community pool is predetermined according to the risk of their customers.

This gives insurers the incentive to manage the risks of their clients, as they keep any excess premium. In Australia, insurers contribute to the community rating pool based on the actual cost of their older clients, which provides no incentive to manage that cost, Fitzgibbon says.

At a company level, NIB has seen several mergers slip through its fingers in recent years: AHM, Manchester Unity and GMHBA.

Fitzgibbon says the decision not to fight harder for these came down to disciplined investment criteria.

“We don’t see any clear and present opportunities for M&A," he says.

In the coming year, the youth-targeted NIB will try to woo a larger portion of older members with products which enable them to tailor their cover to a greater extent.

The insurer is also aiming to grow its international workers and students insurance businesses, expand in Western Australia, and further promote the life insurance it distributes for Tower Australia.